Question

Suppose that there are two industries, A and B. There are five firms in industry A with sales at $5 million, $2 million, $1 million, $1 million, and $1 million, respectively. There are four firms in industry B with equal sales of $2.5 million for each firm. The four-firm concentration ratio for industry B is:

Answer 1

The four-firm concentration ratio for industry B is 1.00

Step-by-step explanation:

Concentration ratio: It is a ratio which shows a relationship of total sales of each firm with the total industry sales

In mathematically,

Concentration ratio = (Total sales of each firm) ÷ (total industry sales)

where,

Total sales of each firm = $2.5 million + $2.5 million + $2.5 million + $2.5 million = $10.00 million

And, the industry sales = $5 million + $2 million + $1 million + $1 million + $1 million = $10.00 million

Now put these values to the above formula

So, the ratio would equal to

= $10 million ÷ $10 million

= 1.00